The direction of the April WTI crude oil market on Thursday will be determined by trader reaction to yesterday’s high at $58.77.
U.S. West Texas Intermediate crude oil futures are edging lower early Thursday, giving back some of this week’s gains, although losses are being limited by OPEC+ production cuts and hopes that rollouts of vaccines will drive a recovery in demand.
At 04:20 GMT, April WTI crude oil is at $58.21, down $0.36 or -0.61%.
“Crude oil futures rallied following a bigger than expected fall in inventories in the U.S.,” ANZ said in a note. “However, sentiment was curtailed by a rise in gasoline inventories.”
The early weakness could also be reflecting the notion that the market has moved too far ahead of the fundamentals.
The main trend is up according to the daily swing chart. A trade through $58.77 will signal a resumption of the uptrend.
The main trend will change to down on a trade through $51.53. This is highly unlikely. However, there is plenty of room to the downside for a normal 50% to 61.8% correction.
The short-term range is $51.53 to $58.77. Its retracement zone at $55.15 to $54.30 is a potential downside target. This zone will move up as the price moves higher.
On Wednesday, the market pierced the April 23, 2019 main top at $58.57, but there was no follow-through. A sustained move over this level will put the market back on track to challenge the November 7, 2018 main top at $62.64.
The direction of the April WTI crude oil market on Thursday will be determined by trader reaction to yesterday’s high at $58.77.
A sustained move over $58.77 will indicate the presence of buyers. There is no resistance until $62.64. I don’t anticipate a spike into this level, but the same price action we’ve been seeing since February 1.
A sustained move under $58.77 will signal the presence of sellers or that the buying is easing. Taking out yesterday’s low at $57.98 will be a sign of weakness because it will break the “higher-high, higher-low” chart pattern. The move will also make $58.77 a new minor top.
Taking out $58.77 then finishing lower for the session will form a closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction with $55.15 to $54.30 the next likely target.
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James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.